Pakistan has staved off the threat of US sanctions and is more concerned with United Nations restrictions in the upcoming export of wheat to Iran to clear outstanding power bills.
Wheat can be supplied to Iran under barter trade and does not come under UN sanctions.
According to sources, a couple of ministries, including the Foreign Office, backed the proposal of wheat export to Iran under barter trade in a meeting of the Economic Coordination Committee (ECC) on July 30, stressing it was not restricted by UN sanctions.
Keeping in view the decision taken by the previous cabinet, the ECC may approve export of 30,000 tons of wheat, out of approved 100,000 tons, to Iran as well as payment of $70 per ton as cost differential, they said.
The Finance Division, Ministry of Foreign Affairs and Ministry of Water and Power supported the idea of wheat shipment to Iran under barter trade to avoid sanctions and pay bills for electricity purchase from Tehran.
In the next meeting, the finance ministry would come up with a report on payment of $70 per ton cost differential by the government to cover transport costs and sale of wheat below-market prices.
Pakistan has agreed to sell wheat at $300 per ton to pay for power purchase by the National Transmission and Dispatch Company (NTDC) from Iran’s Tavanir. The government will pick up the price differential in light of an ECC decision on August 7, 2012.
NTDC has already paid rupee equivalent of $9 million to Pakistan Agriculture Storage and Services Corporation (Passco) as cost of 30,000 tons of wheat. NTDC owes $53.21 million to Tavanir for electricity purchase.
Earlier, the ECC in a meeting held on March 13, 2012 decided to explore the possibility of striking a barter trade agreement with Iran for export of one million tons of wheat. Subsequently, the cabinet in May this year approved sale of 100,000 tons.
Iranians need 30,000 tons at a rather short notice to meet urgent requirements.
Published in The Express Tribune, August 6th, 2013.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.